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Jane Kinsella
The Real Estate Company Ltd.
11, 5080 12A St. SE, Calgary, Alberta
P: 403-874-6143
F: 403-476-5467

Wednesday, August 18, 2010 - Calgary Resale Market Tumbles

It was a sinking feeling from coast to coast in July, as home sales dropped by nearly a third across the entire country.

But whereas realtors were likely not impressed to see sales plunge, homebuyers won’t have to fear price spikes any time soon, observers say.

That’s especially true in Calgary, a city that had one of Canada’s most overheated real estate markets prior to the financial meltdown in late 2008. Now, it’s seeing one of the sharpest year-over-year pullbacks in sales, shows data released Monday by the Canadian Real Estate Association.

Residential sales in Calgary dropped to 1,612 units in July, a decrease of 41.3% that’s well above the national sales decline of 30%. Only Vancouver and Victoria, home to this country’s most expensive real estate, saw a steeper sales drop last month. The numbers are startling, but not surprising to market observers.

“We’ve been anticipating a pullback,” said ATB Financial economist Todd Hirsch. “I think we are in for some calming of the market. But I don’t think anyone should be too alarmed about that. It’s just the market correcting itself.”

Hirsch said the anticipation of higher mortgage rates in the second half of 2010, which meant mortgages would rise, had persuaded many to take advantage of cheap money, and move their purchases into 2009 and early 2010. That is why, Hirsch said, the year-over-year comparisons are so stark.

The sharp drop in sales, however, didn’t pull down prices. In fact, the average Calgary home, at $402,809, was 5.5% more expensive this July than last.

“I’m surprised that prices are holding up,” Hirsch said. “I’d expect prices to sort of level off, perhaps with a few months where we do see some dips.”

Hirsch said ATB generally considers Calgary homes to be slightly overvalued.

BMO Capital Markets economist Robert Kavcic agrees.

He said Calgary home prices will likely be “moving sideways” over the next one to two years, meaning they’ll remain largely constant. Kavcic said he considers home prices in the energy capital to be “a little bit stretched relative to incomes and relative to rents.”

In a separate report, the Conference Board of Canada said Calgary’s long-term prognosis of the residential construction industry is positive.

The Ottawa-based think thank said Monday it expects Calgary housing starts, a measure of the number of foundations poured, to continue rising in the short and long term.

posted in News at Wed, 18 Aug 2010 17:28:29 +0000

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